Nowadays most business enterprises are engaged in strategic planning with using new ideas, objects, practices and reaching the goals. Generally strategy is a simple way to analyze the current situation of organization, expected future situation, right direction confidently and achieving the objects. Actually it is more than that which provides the systematic way for identifying and evaluating factors external to the firm and fixing them with the organization's abilities. In addition strategy is a long process over long time period with individual of resources with a competitive environment to meet up customer needs. In other words, strategy is a method of process of direction and scope of an organization to achieve opportunities with its pattern of resources and meet the demand of markets and stakeholder expectations. A company's strategy can decide the fate of an organization, help them to create innovative products and sustain their competitive advantage. Honda was able to successful launch their motor cycles and sell them in USA in 1960 through the "success against all odds" strategy used by Mr. Honda. In order to restore or maintain competitive edge many managers are now abandoning old strategy recipes and looking for a new set of more effective strategies in turbulent environments. Yet, are the recipes really new or are they just the emperor's new clothes (Johnson & Scholes 1993)
Though there is no single universal definition for strategy, it can be defined as "the pattern or plan that integrates an organizations major goals, policies, and action sequences into a cohesive whole. A well formulated strategy helps to marshal and allocate an organization's resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents"
Mainly Strategies are shaped and designed for the whole organization by senior managers, therefore administrating strategy should start from the top to bottom. Effective strategies involve discussion and communication. Strategic management focuses on integrating managerial abilities and techniques such as; marketing, financial/accounting, human resource management, production management, research development to achieve organizational success (David 1995). Organizations should be able to sustain competitive advantage in a discrete and identifiable market, It is the way a company creates value through the configuration and co ordination of its multimarket activities. When all these are carefully managed then the organization is able to achieve its competitive or corporate advantage. Corporate strategy involves the following; vision which is the ambitious aspiration of a company, Goals and Objectives; short and medium-term quantitative targets, resource; these are skills assets and capabilities of the firm, business; this is the industry by which the firm operates, Structure; the way the corporation is divided into discrete units Systems; set of formal policies and routine and Processes; informal elements of the organizational activities. (Bower, 1970). Corporate Advantage results from a harmonious combination of the above elements which work together to create value of the company.
Strategy Formulation process
Strategy formulation is the process of identifying or deciding what to do by a combination of the following main processes:
- First step is doing a situation analysis, self-evaluation followed by a competitor analysis, for both that is internal environment and external environment and then micro environmental and macro environmental. This also includes identifying available opportunities and potential threats in the company's internal environment and attaching some estimate or risk to the perceptible alternatives. Management tools and concepts like SWOT Analysis and PEST Analysis are used to evaluate internal and external environment respectively (Lynch 2006).
- Concurrent with this assessment, objectives are set. These objectives should have a defined timeline; some that are short term and others that are long term. This involves crafting of mission statements, vision statements, overall corporate objectives, strategic business unit objectives and tactical objectives The statements provide a vision or target goal for the organization to achieve and define what the organization does and why.
- These objectives should in the light of the situation analysis suggest a strategic plan. The plan provides the details of how to achieve these objectives. describes the parties responsible for completing the tasks related to the strategic objectives and provide a timetable for completion. (Johnson & Scholes 1993)
- Effective implementation can make a sound strategic decision ineffective or a debatable choice successful. The implementation of strategy is comprised of a series of sub activities primarily administrative. Its purpose is determined, and then the resources of a company can be mobilized to accomplish it. An organization structure necessary for the efficient performance of the required tasks must be made effective by information systems and relationships permitting coordination of subdivided activities (Mintzberg 1990)
- Post implementation, the results of the strategy need to be measured and need to be evaluated, with changes made as required to keep the strategy on track. Control systems are made and implemented to facilitate the monitoring and evaluation. Standards of performance are then set, the actual performance is measured, and appropriate action is taken to ensure success. The implementation process and failure/success can be monitored with the help of various management tools like Dashboards, steering committees, performance appraisals, reviews etc (Johnson & Scholes 1993)
Ten School of Thoughts
There are numerous ways of studying strategic management, some of them are more pedagogic than others. One method is to classify strategic management into schools of thought and this is in terms of teaching and learning an ingenious method. Mintzberg et al (1998) propose a total of 10 schools of thought, these being categorized into two: Firstly, prescriptive schools which were especially in vogue in the 70s and 80s and to some extent are still very much loved by companies today. Secondly, Descriptive schools, most of which have been discovered over the last 20 years.
- The Design School - This school sees strategy as a process of conception
- The Planning school - Refers to strategy as a formal process of planning
- The Positioning school - Sees strategy as an analytical process.
- The Entrepreneurial school - Considers strategy formulation as a visionary process
- The Cognitive School- This school sees strategy formation as a mental process
- The Learning School- This school sees strategy formation as an emergent process
- The Power School-This school sees strategy formation as a process of negotiation
- The Cultural School- This school sees strategy formation as a collective process
- The Environmental School -This school sees strategy formation as a reactive process.
- The Configuration School - This school sees strategy formation as a process of transformation
Richard Whittington (1993) has devised an historical typology of strategic management philosophy and theory. He outlines the nature and the assumptions for each of four strategy 'conceptions' within which most of the literature could be placed. His view is that a dominant 'concept' is identifiable in each decade. The habits of mind and power relations of the different concepts discussed appear to incorporate a number of the 'schools' designated by Mintzberg. He proposes four approaches, each one pertaining to a particular period of time. He speaks of four criteria these being: Deterministic or Emergent, Single goal or Pluralistic, Strategy style and Influences. This is summarized in the table below:
Strategy - A Comparative Analysis
Strategy as practice focuses on strategy as social practice on how practitioners of strategy really act and interact (Whittington 1996). The substance is a focus on micro activity, that is individuals acting. As per Johnson (2003) an activity based view of strategy that focuses on the detailed processes and practices which constitute the day to day activities of organizational life and which relate to strategic outcomes." The day to day work of strategy comprises individual skills, the organization of work and strategy technologies in use. The strategy as practice approach can be considered as both complementary to, and an extension of the strategy process perspective.
The classical view of strategy is based on the military tradition, in which the world is a rigid hierarchy with a solitary general who makes decisions. The military model is complemented by an intellectual inheritance from economics. Classical strategy places great confidence in the readiness and capacity of managers to adopt profit maximizing strategies through rational long-term planning
A processual view of the firm is one which postulates organizations as coalitions of individuals, each of whom brings their own personal objectives and cognitive biases to the organization. Processual scholars argue that because of these limitations strategy becomes the gradual adjusting of routines to awkward messages from the environment which eventually force themselves on the manager's attention. Strategy is not only planned and followed action, but it is also a way to make sense of the chaos of the world
AXA PPP HealthCare
AXAPPPhealthcare is one of the UK's largest, most experienced providers of private medical insurance. They have been providing private medical care since 1940. They offer a range of private medical insurance plans to enable individuals and employers to meet their healthcare needs. AXAPPPhealthcare is a member of the AXA Group - a world leader in financial protection with over 170,000 employees across UK, Europe, America, Asia- Pacific & Africa, 400,000 shareholders and revenues of €93.6 billion in 2007 (http://www.axappphealthcare.co.uk)
In Order to attain the key leadership ambition, AXA Group has built their strategy around a sustainable business model and well defined operational priorities. AXA Group's business model entails stimulating, consolidating and then developing organic growth while keeping existing clients and acquiring new clients to ensure that they are able to grab genuine opportunities for external growth. AXA Groups developmental efforts are centered on the most profitable segments (High revenue return) and they seek to enhance its positioning in high breed, developed and high growth market (Datamonitor, 2009).
AXA Group has set 5 operational priorities or catalysts for strategic change which are known as the five cylinders of its growth:
- Product innovation - is a source of differentiation that reflects AXA's desire to offer value every time it introduces a new product in the market. The focus is on product development which satisfies customers' needs.
- Core business expertise - AXA Groups goal is to offer the best possible service at the best possible price. This can be achieved by ensuring all their strategies focus on maintaining their core competencies.
- Distribution management- a second source of differentiation that reflects the groups aspiration of enhancing sales performance by reducing the administrative load on its distributors. This is strategically different.
- Quality of service - Provide good quality service delivery to end customers. Ensure excellence in service delivery and quality
- Productivity- AXA seeks to decrease operating costs and improve quality of service every year. Cost reduction has been an ongoing challenge for most organizations, however for AXA is not a one-off reaction to a difficult or demanding operating environment, but a continuous process (http://www.axa.co.uk)
To achieve its long term goals and objectives, AXA ensures operational excellence in each of these key areas and ensures its strategy is the core of these areas. For this purpose they have adopted a continuous improvement program based on the key findings from the voice of the customer surveys and feedback. AXA performs these programs and runs innovative projects through its Business Intelligence team. Business Intelligence team is their core strategic team and consists of a driving committee which includes Head of each department within AXA, the Six Sigma team and change management team.
Strategic Change/Implementation done by AXA
AXA PPP Healthcare conducted a "voice of the customer" survey in 2007 which called for a need for strategic change to ensure AXA keeps its competitive advantage in the fast growing and dynamic Health care industry. The key area of improvement identified was the turnaround time for the claims processed by the Claims processing team which operates from UK & India. This could be achieved by improving productivity, reducing reworks, improving service delivery and achieving operational excellence. The Business Intelligence was given the responsibility to drive and implement the strategic change. The first step taken by the team was to review the existing process i.e. identify the opportunities and threats. Based on the current capacity and scope of improvement, objectives were set.
Objective - Objectives were set for the organization to improve productivity by 20% (increase number of claims processed per day per assessor) and improve turnaround time of claims (to 93% of claims to be completed in 6 days) by end of 2008.
Resources - Resources within the operation teams were identified to drive the strategy, they were called change agents. A team of green belts and black belts was made to support the data analysis, to identify the areas of improvement and support implementation process.
Projected Benefits - Enhance customer satisfaction by improving turnaround time of claims and reduce cost by improving productivity.
Methodology - The lean methodology was adopted by the team to identify improvement potential. Lean took kit was utilized to identify key areas for enhancing productivity and turnaround time.
Phase 1 - Data collation for the existing process, review of current Key Performance Indicators & use the Lean Tool kit to analyze the "as is" process. Conduct time motion study to identify the true potential or capacity.
Phase 2 - Post analysis and time motion study, following improvement areas and implementation levers were identified.
Phase 3 - To monitor the performance of the process on the new implementations, new measurement metrics and KPIs were introduced. These KPIs were drilled down to each team in the claims processing department and monitored regularly by using visual dashboards
Benefits achieved from Strategic Change
- Productivity benefit of 24% achieved which resulted to a reduction of 28 FTEs and cost savings of 17920 GBP per month. Claims processed per person per day increases to 82 from 65.
- Target for Turnaround time exceeded, 94.3% claims were completed in 6 days for Q4 of 2008.
- Voice of Customer - Score for "Voice of customer" survey for 2008 was 87% which improved by 8 % compared to the score for 2007 which was at 79% .
Many companies that we work with spend a lot of much time focusing on tactics, planning and execution and not enough time really on determining what their overall strategy is as a business and the impact on spending enough time at the strategic level can really have a stunting impact on an organizations overall ability to accelerate their sales, gain market leadership, and power up its revenue growth. As we can see from AXA's example in this case study, there are direct cost benefits of using management strategy to run their business. We can conclude that an organization can function systematically and gain competitive advantage by using a strategic approach.
- David, F.R. (1995), Strategic Management, 5th edn, London Prentice Hall.
- Bower, J.H, (1970) Managing the resource Allocation Process. Cambridge, MA: Harvard University Press.
- Chandler, A. (1962), Strategy and Structure Cambridge: MIT press. p13
- Johnson, G. and Scholes, K. (1993), Exploring Corporate Strategy: Tex and cases, 3rd edn (London: Prentice Hall).
- Lynch,R.(2006) Corporate strategy 4th edition, Prentice Hall
- Mintzberg H. et al., Strategy Safari: A Guided Tour Through The Wilds of Strategic Management, Prentice-Hall, 1998.
- Mintzberg, H (1990) 'Strategy formation: schools of thought' in JW Fredrickson (ed) Perspectives on Strategic Management New York: Harper Business, pp. 105-236
- Whittington R, What is Strategy - and Does it Matter? Routledge, 1993.
- Datamonitor Report, Company Profile - AXA, Publication date: 6 July 2009
- https://www.axa-abs.co.in (accessed on 14 Dec 2009)
- https://www.axa.co.uk (accessed on 12 Dec 2009)
- http://www.axappphealthcare.co.uk (accessed on 4 Dec 2009)
Interview with Nial Stirling - Customer Relationship Manager - Phillips House, Crescent Road, Tunbridge Wells, TN1 2PL, 13th November 2009